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Business Marketing

Module 4FORMULATING PRODUCT

PLANNING

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WHAT IS AN INDUSTRIAL PRODUCT?

The industrial product is defined not only as a physical entity, but also as a

complex set of economic, technical and personal relationship between the

buyer and the seller.(Basic, enhanced and augmented properties )

Example: A company as a buyer of an industrial product can consider:Economic priceTechnical specifications of the product

Legal If the supplier delays deliveryPersonal between the company and the suppliersRelationships

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Factors Demanding Change in product Strategy

The behaviour of the product life-cycle depends on the three factorsover which management has little or no control. These are :

Changing needs of customers warehouse (from 2 to 6 feet storing) Changes in technology tubeless tyres Changing Govt policies/laws LPG 1991, ban for wooden windows.

PLC - The product life-cycle concept suggests that different marketingstrategies are needed at different stages of the PLC.

The PLC concepts also highlights the importance of long-term planning fora new product, including realization of competition and its impact on

profits at later stages.

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INDUSTRIAL PRODUCT LIFE CYCLE

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INDUSTRIAL PRODUCT LIFE CYCLE FORHIGH-TECH PRODUCT

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INDUSTRIAL PRODUCT LIFE CYCLE FORCOMMODITY PRODUCT

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APPLICATION OF PRODUCT LIFE-CYCLE THEORY TOMARKETING STRATEGIES

INTRODUCTION STAGE

Some industrial products get accepted rapidly after introduction andothers are accepted slowly. This depends upon changes in the users habits.

For slowly accepted products the marketing strategy should concentrateon market development efforts. Ex type writers.For fast accepted products the marketing strategy should be evolved tomeet intense competition. Electric calculators

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GROWTH STAGE

As the product enters the growth stage an industrial marketer should focus

the marketing strategy on three key areas:

i. Improve product design to offer more benefits or product features to cover

wider segments of the market

ii. Improve distribution so that product availability to customers is strong

iii. Reduce the price as increased volume of production lowers the cost.

Ex LCD projectors price were reduced to less than 1,00,000. due to

increase in sales vol.

If these strategies are ignored by an industrial marketer, competitorsare encouraged to enter the market because of weak availability of

product and good profitability due to high prices.

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MATURITY STAGE

As the products enters the maturity stage, the number of competitorsentering the market increase resulting in the decline in the growth of

profits.The marketing strategy when a product is in maturity/saturation stage

should be:i. Enter new markets ( from domestic market to exports)ii. Keep the existing customers satisfiediii. Cut marketing, production and other costs to maintain profit margins.

Ex : ISO 9000 certification for quality.SAP v/s Sybase

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DECLINE STAGE

In this stage, price competition is more severe, and concurrently the salesand profits decline.

The strategy adopted by an industrial marketer is to either withdraw the product from the market or develop a substitute product for replacement orreduce marketing and other expenses substantially to make some profits.

For industrial products, the decline tends to proceed rapidly since newtechnologies make established products obsolete.Ex, fiber optic telecom cables replacing jelly filled cables.

Nissan & Renault

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LOCATING INDUSTRIAL PRODUCTS IN THEIR LIFE-CYCLE

The product life cycles are not caused by time but depends on anumber of factors l ike industry profi ts, rate of change in i ndustry salesgrowth and the inf ormation about competi tors.

The steps involved in locating a product in its life are as follows:

i. Develop a trend analysis for the past three to five years based oninformation to be collected for an industrial firm for a product, onquantity and value of sales, profits as a percentage of sales, market share,number of competitors and prices.

ii. Analyse competitors market share, product performance, new product

introduction, diversification or expansion plans.iii. Estimate and project sales and profits of the products over the next three

to five years.iv. From the above analysis, fix the products position on its life cycle curve.

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DEVELOPING PRODUCT STRATEGIES FOR EXISTINGPRODUCTS

The various steps involved are:

i. Evaluate the performance of all the existing products or product lines byusing product evaluation matrix .

ii. By using perceptual mapping technique , examine the relative strengthsand weaknesses of the companys products in comparison to competitors

products.iii. Based on the above analysis, decide the product strategies for the

existing products, that is, which products should be continued, which products should be modified, which products/product lines should be

dropped, and which new product items/product lines are to be added.

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1. PRODUCT EVALUATION MATRIX

DECLINE STABLE GROWTH

Below Target AboveTarget Target



Company salesprofitability

IndustrySales

MarketShare

Dominant

Growth AverageMarginalDominant

Stable

Decline

AverageMarginalDominantAverageMarginalDominant

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3. DECIDING PRODUCT STRATEGIES

Based on the two techniques- product evaluation matrix and perceptual mapping, the industrial marketer can now decide on one of thestrategy options mentioned below:

1. Maintain the product and its marketing strategy.

2. Modify the product and/or change the marketing strategy.3. Eliminate the product/product line.4. Add new products/product lines.

It is important to identify the causes of unsatisfactory product performance. The quantitative performance parameters such as sales,market share and profitability cannot indicate the causes of poor product

performance.

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NEW PRODUCT DEVELOPMENT

CLASSIFICATION OF NEW PRODUCTS

a) Products that are innovative and new to the world. b) Products that are new to the company, but not new to the market.c) Revisions or improvements to the existing products in the existing

markets.d) Addition to the existing product lines with additional marketse) Re-positioning existing products to the new market segmentsf) Products with substantial cost reductions without reduction in

performance

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NEW PRODUCT DEVELOPMENT PROCESS

COMMERCIALISATION

MARKET TESTING

PRODUCT DEVELOPMENT

BUSINESS ANALYSIS

CONCEPT DEVELOPMENT & TESTING

IDEA SCREENING

IDEA GENERATION

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INNOVATION, COMPETITIVENESS ANDTECHNOLOGY

Innovation implies not only creating new products, but also introducingnew methods to improve any operations.Direct relationship exists between innovation and competitiveness. Acompany can increase or maintain a degree of differentiation fromcompetitors through continuous innovation.Technological innovations create new products and services that are newto both the company and the market.Digital revolution has placed a new set of capabilities with companies aswell as consumers.

Company capabilitiesConsumer capabilities

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BREAK THROUGH AND INCREMENTAL INNOVATIONS

Breakthrough innovations, also called radical innovations, are biginnovations that require intensive technology and/or applicationsdevelopment to create a new market.

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HIGH-TECH MARKETING

Hi-tech includes a wide range of industries such astelecommunications, computers, software, biotech and consumerelectronics.

DIFFERENTIATING CHARACTERISTICS OF HIGH-TECHMARKETING

High technological uncertaintiesHigh market uncertainty

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HIGH TECHNOLOGICAL UNCERTAINTY

SOURCES OFHIGH

TECHNOLOGICALUNCERTAINTIES

Will the product function as promised?

Will the promised delivery be met?

Will the supplier give high quality service?

Will there be a risk of obsolescence?

Will there be any side effects of the newproduct/service?

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HIGH MARKET UNCERTAINTY

SOURCES OF HIGHMARKET

UNCERTAINTY

Which are the customer needs that newtechnology can meet?

How will needs change in future?

Will the market accept technicalstandards?

How fast will the innovation spread?

What is the size of the potential market?

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HIGH-TECH MARKETING

OTHER DIFFERENTIATING CHARACTERISTICS OF HIGH-TECH MARKETING

High competitive volatility

Short life of high-tech products

High development cost

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IMPACT OF TECHNOLOGY ADOPTION LIFE CYCLE

16%

34%34%

13.5%2.5%

TIME OF ADOPTION OF INNOVATIONS

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UNIQUE NATURE OF HIGH TECH MARKETINGSTRATEGY

1. Target a niche market

2. Plan whole product properties

3. Develop partnerships

4. Unique positioning strategy

5. Integrated marketing communication strategy

6. Multi-channel distribution strategy

7. Skimming pricing strategy

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MARKETING OF BUSINESS SERVICE

The services in industrial business markets can be classified into twogroups:

a. Product supported by services b. Pure services

Pure

Tangible product

MajorServiceWithMinor

product

EqualPartsOfProduct&Service

Pure

Intangibleservice

MajorProductwithminorService

Materials &Components

PersonalComputers

Hotels forconferences

GoodsTransportation Legal

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MARKETING STRATEGIES FOR BUSINESSSERVICES FIRMS

Company

Employees Customers

ExternalMarketing

InteractiveMarketing

InternalMarketing

Three Types Of Marketing Business Service Firms

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MARKETING STRATEGIES FOR BUSINESSSERVICES FIRMS

Segmenting and industrial target segments

Service differentiation

Service packages

Service pricing

Service promotion

Service distribution

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PRODUCT AND SERVICE QUALITY

Meaning of QualityQuality is a totality of features and characteristics of a product or

service that bear on its ability to satisfy stated or implied needs.

DIMENSIONS USED FOR MEASURING SERVICE QUALITY

SERVICE DIMENSION BRIEF DESCRIPTION EXAMPLES

Reliability Satisfying a promise Promise delivery schedulemet

Tangibles Appearance of physicalfacilities and personnel

Brochures, experiencedand qualified service

providers Responsiveness Willingness & ability to

provide prompt serviceQuick response tocustomers complaints

Assurance Trust and confidence Capable staff

Empathy Treating customers asindividuals

Adapting to the needs ofindividual customer

Documents

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